Nearly 65% of GCC expats do not have a pension

Close to 65 per cent of expatriates in the GCC do not have a pension, a new study has found.

The annual survey by financial firm Guardian Wealth Management stated that GCC expats were far behind their counterparts in North America, Europe and Asia when it comes to retirement planning.

According to the study, 64.21 per cent of GCC expats have no pension, compared to 14.49 per cent in North America, 43.85 per cent in Europe and 61.11 per cent in Asia.

Hamzah Shalchi, regional manager in the Middle East, said: “From last year’s study we find out that most savers are not saving enough for their desired retirement lifestyle, but this year we discovered that over half of expats don’t have a retirement fund at all which is truly shocking.

“I believe GCC expats are quite far behind other expat regions such as Asia and Europe because the high salaries and tax-free incomes make it much easier to spend earnings rather than save them. As with most cases, people come to work here and before they know it, it’s been five years and they haven’t saved a penny.”

The study also found that 24.21 per cent of those who had a pension said it was based in their home country such as the UK.

In contrast, 81.16 per cent of respondents in North America had an active pension in their home country, while 50.27 per cent of expats in Europe and 31.11 per cent of expats in Asia had home pensions.

“The reason for the worrying lack of pensions back home could partly be because of the demographic of expats in the GCC,” said Shalchi.

“As is the case with foreign workers in places such as the UAE, many are under the age of 30 and certainly 40, meaning they may not have necessarily started thinking about saving for retirement.

“However, there is quite a disparity between what people think they need to save for retirement and what they actually need to save for their desired lifestyle. Due to compound interest, it is better to start saving earlier but for less time to allow the pension pot to grow naturally.”

The study also stated that another option for expats is to transfer their pension offshore, with 11.58 per cent of GCC respondents saying that they had moved their pension offshore. This is compared to 4.35 per cent in North America, 5.88 per cent in Europe and 7.78 per cent in Asia.

“Due to the lucrative benefits such as greater tax efficiency, better returns and flexibility, transferring pensions offshore was starting to become a popular option for foreign workers in the GCC, particularly from the UK,” the report said.

However, recent changes to UK tax law has imposed a 25 per cent transfer fee on Qualifying Recognised Overseas Pension Schemes (QROPs) making the option much less attractive, it added.

“The announcement of the pension transfer tax in the latest UK Spring Budget has largely killed the QROPs market and this will affect any transfers from March 2017 moving forward,” said Shalchi.

“However, there are various options such as Self-Invested Personal Pensions (SIPPs) that may be better suited,” he added.